Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
______________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2010
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to____________
Commission File No. 000-27011
ALPINE AIR EXPRESS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 33-0619518 |
(State or Other Jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) |
|
|
|
1177 Alpine Air Way
Provo, Utah 84601
(Address of Principal Executive Offices)
(801) 373-1508
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer ___
Accelerated filer ___
Non-accelerated filer ___
Smaller reporting company _X__
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: September 7, 2010 - 36,271,461 shares of common stock.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed consolidated financial statements of Alpine Air Express, Inc., a Delaware corporation, and its subsidiary Alpine Aviation, Inc., a Utah corporation, as required to be filed with this 10-Q Quarterly Report were prepared by management, and commence on the following page, together with related notes. In the opinion of management, the financial statements present fairly the consolidated financial condition, results of operations and cash flows of Alpine Air for the periods presented.
2
ALPINE AIR EXPRESS, INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2010
3
ALPINE AIR EXPRESS, INC.
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
| PAGE |
Condensed Consolidated Balance Sheets at July 31, 2010 (Unaudited) and October 31, 2009 (Audited) | 5 |
|
|
Unaudited Condensed Consolidated Statements of Operations for the three and nine Months ended July 31, 2010 and 2009 | 6 |
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2010 and 2009 | 7-8 |
|
|
Condensed Notes to Unaudited Consolidated Financial Statements | 9-13 |
|
|
|
|
4
ALPINE AIR EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS
| July 31, 2010 Unaudited |
| October 31, 2009 Audited | |
ASSETS CURRENT ASSETS: |
|
|
|
|
Cash and cash equivalents | $ | 506,523 |
| $ 992,241 |
Trade accounts receivable, net Note receivable |
| 1,435,019 48,822 |
| 1,468,854 - |
Inventories |
| 2,334,205 |
| 1,850,486 |
Prepaid expenses |
| 697,626 |
| 253,399 |
Deposits Cash value life insurance Income taxes receivable |
| 38,575 85,572 - |
| 64,549 80,550 324 |
Deferred tax asset, current |
| 322,000 |
| 271,000 |
Total current assets |
| 5,468,342 |
| 4,981,403 |
PROPERTY AND EQUIPMENT, NET RESTRICTED CASH |
| 21,614,234 204,946 |
| 21,235,497 200,695 |
OTHER ASSETS, NET |
| 133,642 |
| 142,629 |
Total assets | $ | 27,421,164 |
| $ 26,560,224 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES: |
|
|
|
|
Trade accounts payable | $ | 642,106 |
| $ 991,513 |
Accrued liabilities Dividends payable Income taxes payable |
| 1,042,293 41,212 37,900 |
| 837,229 244,616 - |
Deferred revenue |
| 99,395 |
| 120,037 |
Line of credit |
| - |
| 276,021 |
Current portion of long-term debt |
| 1,400,000 |
| 1,842,000 |
Total current liabilities |
| 3,262,906 |
| 4,311,416 |
|
|
|
|
|
DEFERRED TAX LIABILITY LINE OF CREDIT |
| 1,580,000 - |
| 620,000 472,854 |
LONG-TERM DEBT, net of current portion |
| 7,571,819 |
| 7,147,937 |
Total liabilities |
| 12,414,725 |
| 12,552,207 |
|
|
|
|
|
PREFERRED STOCK, $.001 par value, $9.104 stated value, 1,000,000 shares authorized, 820,000 shares issued and outstanding. |
| 7,465,280 |
| 7,465,280 |
STOCKHOLDERS' EQUITY: |
|
|
|
|
Common stock, $.001 par value, 100,000,000 shares authorized, 36,271,461 shares issued and outstanding. |
| 36,271 |
| 36,271 |
Additional paid-in capital |
| 2,491,868 |
| 2,457,550 |
Retained earnings |
| 5,064,682 |
| 4,094,845 |
|
| 7,592,821 |
| 6,588,666 |
Less treasury stock, 211,980 and 141,320 shares at cost, respectively |
| (51,662) |
| (45,929) |
Total stockholders equity |
| 7,541,159 |
| 6,542,737 |
Total liabilities and stockholders equity | $ | 27,421,164 |
| $ 26,560,224 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ALPINE AIR EXPRESS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
| For the Three Months Ended July 31, |
| For the Nine Months Ended July 31, | ||||||||
|
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| 2010 |
|
| 2009 |
|
| 2010 |
|
| 2009 |
OPERATING REVENUE: |
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|
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|
Operations |
| $ | 4,802,568 |
| $ | 4,817,312 |
| $ | 14,904,885 |
| $ | 15,377,033 |
Public services |
|
| 20,519 |
|
| 6,090 |
|
| 41,563 |
|
| 134,292 |
Total operating revenues |
|
| 4,823,087 |
|
| 4,823,402 |
|
| 14,946,448 |
|
| 15,511,325 |
DIRECT COSTS: |
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|
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|
|
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Operations |
|
| 3,356,789 |
|
| 3,742,150 |
|
| 10,554,802 |
|
| 11,924,615 |
Public services |
|
| 48,945 |
|
| 44,075 |
|
| 122,312 |
|
| 175,252 |
Total direct costs |
|
| 3,405,734 |
|
| 3,786,225 |
|
| 10,677,114 |
|
| 12,099,867 |
Gross profit |
|
| 1,417,353 |
|
| 1,037,177 |
|
| 4,269,334 |
|
| 3,411,458 |
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| 724,774 |
|
| 441,040 |
|
| 1,570,842 |
|
| 1,602,110 |
Total operating expenses |
|
| 724,774 |
|
| 441,040 |
|
| 1,570,842 |
|
| 1,602,110 |
Operating income |
|
| 692,579 |
|
| 596,137 |
|
| 2,698,492 |
|
| 1,809,348 |
OTHER INCOME (EXPENSE): |
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|
|
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|
|
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|
|
|
Interest income |
|
| 2,816 |
|
| 2,395 |
|
| 9,259 |
|
| 10,660 |
Interest expense |
|
| (381,483) |
|
| (215,939) |
|
| (766,807) |
|
| (660,690) |
Gain on disposal of assets |
|
| 425,044 |
|
| - |
|
| 423,828 |
|
| - |
Gain (Loss) on investments |
|
| - |
|
| 57,158 |
|
| - |
|
| (76,343) |
Total other income (expense) |
|
| 46,377 |
|
| (156,386) |
|
| (333,720) |
|
| (726,373) |
INCOME BEFORE TAXES AND PREFERRED STOCK DIVIDEND Current income tax expense |
|
| 738,956 122,850 |
|
| 439,751 - |
|
| 2,364,772 123,000 |
|
| 1,082,975 - |
Deferred income tax expense |
|
| 297,000 |
|
| 180,000 |
|
| 909,000 |
|
| 441,000 |
NET INCOME |
|
| 319,106 |
|
| 259,751 |
|
| 1,332,772 |
|
| 641,975 |
Preferred stock dividend declared and amortization of preferred stock discount analogous to a preferred stock dividend. |
|
| (122,308) |
|
| (122,307) |
|
| (362,935) |
|
| (453,104) |
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS |
| $ | 196,798 | | $ | 137,444 |
| $ | 969,837 |
| $ | 188,871 |
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NET INCOME PER COMMON SHARE |
|
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Basic |
| $ | .00 |
| $ | .00 |
| $ | .03 |
| $ | .01 |
Diluted |
| $ | .00 |
| $ | .00 |
| $ | .01 |
| $ | .00 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
ALPINE AIR EXPRESS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ending July 31, 2010 and 2009
|
| |||||||
| 2010 |
| 2009 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
| |||
Net income | $ | 1,332,772 |
| $ | 641,975 | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| |||
Gain on disposal of assets Loss on investment Deferred gain amortization |
| (423,828) - - |
|
| - 1,059 (95,997) | |||
Deferred tax expense |
| 909,000 |
|
| 405,111 | |||
Depreciation and amortization |
| 2,508,296 |
|
| 2,355,433 | |||
Stock based compensation |
| 34,318 |
|
| 59,244 | |||
Provision for losses on accounts receivable Provision for inventory obsolescence |
| 76,640 8,402 |
|
| 23,247 - | |||
Changes in operating assets and liabilities: |
|
|
|
|
| |||
Trade accounts receivable |
| (91,627) |
|
| 363,405 | |||
Other assets |
| 22,500 |
|
| (24,192) | |||
Inventories |
| (492,121) |
|
| (954,815) | |||
Income taxes receivable Prepaid expenses Deposits |
| 324 27,273 50,262 |
|
| 35,890 1,928 73,435 | |||
Trade accounts payable Accrued liabilities Income taxes payable |
| (349,407) 205,064 37,900 |
|
| 101,902 (266,911) - | |||
Deferred revenue |
| (20,642) |
|
| (2,295) | |||
Net cash provided by operating activities |
| 3,835,126 |
|
| 2,718,419 | |||
|
|
|
|
|
| |||
CASH FLOWS FROM INVESTING ACTIVITIES: |
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|
|
|
| |||
Purchases of investments Sale of investments |
| - - |
|
| (168,449) 225,434 | |||
Purchases of property and equipment Proceeds from sale of equipment Cash surrender value of life insurance |
| (3,512,478) 1,128,800 (5,022) |
|
| (3,362,857) - (10,545) | |||
Net cash used in investing activities |
| (2,388,700) |
|
| (3,316,417) | |||
|
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| |||
CASH FLOWS FROM FINANCING ACTIVITIES: |
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|
|
|
| |||
Payment on long-term debt Payment on dividends payable |
| (2,519,715) (566,339) |
|
| (1,622,114) (270,977) | |||
Payment for redemption of preferred stock |
| - |
|
| (182,080) | |||
Change in line of credit Proceeds from related party line of credit Purchase of treasury stock |
| (758,875) - (5,733) |
|
| 748,875 50,000 - | |||
Proceeds from long-term debt |
| 1,922,769 |
|
| 1,200,000 | |||
Net cash used in financing activities |
| (1,927,893) |
|
| (76,296) | |||
|
|
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|
| |||
Net change in cash and cash equivalents |
| (481,467) |
|
| (674,294) | |||
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BEGINNING CASH AND CASH EQUIVALENTS |
| 1,192,936 |
|
| 720,794 | |||
|
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| |||
ENDING CASH AND CASH EQUIVALENTS | $ | 711,469 |
| $ | 46,500 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
ALPINE AIR EXPRESS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ending July 31, 2010 and 2009
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
| | 2010 |
| | 2009 |
Cash paid during the period for: |
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|
|
|
|
Interest | $ | 766,807 |
| $ | 660,690 |
Income taxes | $ | 85,000 |
| $ | - |
Non-cash investing and financing activities:
For the nine months ended July 31, 2010, the Company:
·
Capitalized debt issuance costs of $93,040.
·
Refinanced $4,267,962 of long-term debt.
·
Increased prepaid aircraft insurance by issuing $471,500 of debt.
·
Increased lease deposit by $24,288 through the issuance of debt.
·
Exchanged accounts receivable for a note receivable of $48,822.
For the nine months ended July 31, 2009, the Company:
·
Recorded the amortization of a preferred stock dividend and reduced retained earnings by $89,780.
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
ALPINE AIR EXPRESS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed Financial Statements The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at July 31, 2010 and 2009 and for the periods then ended have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Companys October 31, 2009 audited financial statements. The results of operations for the periods ended July 31, 2010 and 2009 are not necessarily indicative of the operating results for the full year.
Recently Enacted Accounting Standards In April 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-13, Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades (ASU 2010-13). ASU 2010-13 addresses the classification of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. FASB Accounting Standards Codification (ASC) Topic 718 was amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entitys equity securities trade shall not be considered to contain a market, performance or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies for equity classification. The amendments in ASU 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010, with early application permitted. We do not anticipate that the adoption of this guidance will have a material impact on our financial position and results of operations.
In February 2010, the FASB issued ASU No. 2010-09, Amendments to Certain Recognition and Disclosure Requirements (ASU 2010-09), which amends ASC Topic 855, Subsequent Events. The amendments to ASC Topic 855 do not change existing requirements to evaluate subsequent events, but: (i) defines a SEC Filer, which we are; (ii) removes the definition of a Public Entity; and (iii) for SEC Filers, reverses the requirement to disclose the date through which subsequent events have been evaluated. ASU 2010-09 was effective for us upon issuance. This guidance did not have a material impact on our financial position and results of operations.
In January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 requires new disclosures for (i) transfers of assets and liabilities in and out of levels one and two fair value measurements, including a description of the reasons for such transfers and (ii) additional information in the reconciliation for fair value measurements using significant unobservable inputs (level three). This guidance also clarifies existing disclosure requirements including (i) the level of disaggregation used when providing fair value measurement disclosures for each class of assets and liabilities and (ii) the requirement to provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for level two and three assets and liabilities. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about activity in the roll forward for level three fair value measurements, which is effective for fiscal years beginning after December 15, 2010. The adoption of this guidance has not had a material impact on our financial position and results of operations.
Management believes the impact of other recently issued standards and updates, which are not yet effective, will not have a material impact on the Companys consolidated financial position, results of operations or cash flows upon adoption.
9
ALPINE AIR EXPRESS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable consist of the following:
| July 31, 2010 |
| October 31, 2009 | |||||
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| |||
Trade accounts receivable Employee advances | $ | 1,577,674 515 |
| $ | 1,535,384 - | |||
Less allowance for doubtful accounts |
| (143,170) |
|
| (66,530) | |||
| $ | 1,435,019 |
| $ | 1,468,854 |
NOTE 3 - NOTE RECEIVABLE
The Company has a secured note receivable from a former equipment lessor, bearing interest at 3%. The terms require that the principal and accrued interest be paid upon maturity of the note, April 30, 2011. As of July 31, 2010 the outstanding balance is $48,822 and is secured by a second lien on a Beech 99 aircraft.
NOTE 4 - PREPAID EXPENSES
Prepaid expenses consist of the following:
| July 31, 2010 |
| October 31, 2009 | |||||
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| |||
Prepaid expenses and credits | $ | 245,744 |
| $ | 84,954 | |||
Prepaid other taxes Prepaid insurance Prepaid training |
| 43,566 401,289 7,027 |
|
| 81,332 80,907 6,206 | |||
| $ | 697,626 |
| $ | 253,399 |
NOTE 5 - INVENTORIES
Inventories consist of the following:
| July 31, 2010 |
| October 31, 2009 | |||||
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| |||
Aircraft parts | $ | 1,883,294 |
| $ | 1,620,614 | |||
Work in process Fuel | | 476,489 35,347 |
| | 247,089 35,306 | |||
Allowance for obsolescence |
| (60,925) |
|
| (52,523) | |||
| $ | 2,334,205 |
| $ | 1,850,486 |
NOTE 6 PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
| Estimated life in years |
| July 31, 2010 |
| October 31, 2009 | |
Building and improvements | 10 - 40 |
| $ | 1,369,559 | $ | 1,286,989 |
Aircraft | 15 |
|
| 19,867,470 |
| 18,746,456 |
Engines | 7 - 10 |
|
| 12,567,781 |
| 12,185,742 |
Equipment | 3 - 10 |
|
| 309,002 |
| 306,655 |
Furniture and fixtures | 3 - 10 |
|
| 324,606 |
| 329,029 |
Vehicles | 5 - 7 |
|
| 128,413 |
| 140,540 |
|
|
|
| 34,566,831 |
| 32,995,411 |
Less: accumulated depreciation and amortization |
|
|
| (12,952,597) |
| (11,759,914) |
|
|
| $ | 21,614,234 | $ | 21,235,497 |
10
ALPINE AIR EXPRESS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 LINE OF CREDIT
The Company has a $1,000,000 line of credit with a lending institution to help manage cash flow and day to day operations. The line of credit has a variable interest rate, currently 6.5% and matures on February 23, 2011. The interest is payable each month on any outstanding balance. As of July 31, 2010 the outstanding balance was $0. The line of credit is secured by two aircraft, Reg #N194GA and N955AA.
The Company also has a $100,000 line of credit with the same lending institution to help manage cash flow and day to day operations. The line of credit has a variable interest rate, currently at 6.5% and matures on August 25, 2016. The interest is payable each month on any outstanding balance. As of July 31, 2010 the outstanding balance was $0. The line of credit is secured by three aircraft, Reg #N194GA, N955AA, and N99GH.
NOTE 8 LONG TERM DEBT
Long term debt consists of the following:
|
| July 31, 2010 |
|
| October 31, 2009 |
Note payable with an interest rate of 8.75% at October 31, 2009. Secured by three aircraft, Reg #N17ZV, N955AA, and N194GA and personally guaranteed by an officer/shareholder. This note was refinanced. | $ | - |
| $ | 815,083 |
| |||||
Note payable issued on August 19, 2009 for $2,524,200 due August 19, 2012. Current interest rate of 6.5%. Secured by four aircraft, Reg #N154GA, N99GH, N326CA, and N239AL and personally guaranteed by an officer/shareholder. |
| 2,183,240 |
|
| 2,453,216 |
Note payable with interest only due at an interest rate of 4.75%. Personally guaranteed by an officer/shareholder. This note was refinanced. |
| - |
|
| 1,200,500 |
|
|
|
|
|
|
Note payable issued on January 7, 2010 for $2,700,000 due January 7, 2016. Interest rate of 7.147%. Secured by four aircraft, Reg #N172GA, N125BA, N219VP, and N198GA. Note payable issued on May 4, 2010 for $400,775 due February 1, 2011. Interest rate of 7.78%. Unsecured note used to finance aircraft insurance premium. Note payable issued on June 11, 2010 for $3,087,407 due June 11, 2015. Interest rate of 5.865%. Secured by four aircraft, Reg #N114AX, N127BA, N24BH, and N950AA. |
| 2,613,011 269,765 3,054,452 |
|
| - - - |
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Capital Lease Obligations |
| 851,351 |
|
| 4,521,138 |
|
| 8,971,819 |
|
| 8,989,937 |
Less current portion |
| (1,400,000) |
|
| (1,842,000) |
Long-term portion | $ | 7,571,819 |
| $ | 7,147,937 |
11
ALPINE AIR EXPRESS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of Series A $.001 par value preferred stock. The preferred stock provides for monthly dividends at an annual rate of 6.5%. As of July 31, 2010 and October 31, 2009 there were 820,000 shares issued and outstanding. This preferred stock is convertible at any time by the holder until December 1, 2011 based on the current market price of the Companys stock. The Company can redeem the preferred stock any time and the Holder can call for redemption of the preferred stock any time after December 1, 2011at a liquidation value of $9.104 per share.
Previous Company financial statements issued after July 31, 2007 classified this preferred stock as an equity instrument. Following recent consultations with the Securities and Exchange Commission, the Company is reclassifying this preferred stock as a mezzanine item outside of the Equity section of the consolidated balance sheets.
NOTE 10 - INCOME PER COMMON SHARE
The following data show the amounts used in computing net income per common share:
| For Three Months Ended July 31, |
| For Nine Months Ended July 31, | ||||||||
|
| 2010 |
|
| 2009 |
|
| 2010 |
|
| 2009 |
Net income available to common shareholders | $ | 196,798 |
| $ | 137,445 |
| $ | ,837 |
| $ | 188,871 |
Weighted average number of common shares used in basic EPS |
| 36,271,461 |
|
| 36,271,461 |
|
| 36,271,461 |
|
| 36,271,461 |
Dilutive effect of preferred stock Dilutive effect of stock options |
| 79,985,143 - |
|
| 74,652,800 - |
|
| 71,628,486 - |
|
| 46,658,000 - |
Weighted average number of common shares and dilutive potential common stock used in diluted EPS |
| 116,256,604 |
|
| 110,924,261 |
|
| 107,899,947 |
|
| 82,929,461 |
|
|
|
|
NOTE 11 CONCENTRATIONS
U.S. Postal Service Contracts - The Company receives the majority of its revenues from contracts with the U.S. Postal Service (USPS). For the nine months ended July 31, 2010 and 2009, the revenues from contracts with the USPS represented 69% and 64% of total revenues, respectively. At July 31, 2010 and October 31, 2009, accounts receivable from the USPS totaled $876,576 and $759,109, or 57% and 49%, respectively. The contracts currently in effect for USPS routes will expire in September 2015. The loss of contracts with this customer would have a material negative effect on the operations of the Company.
12
ALPINE AIR EXPRESS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 COMMITMENTS AND CONTINGENCIES
The Company operates its aircraft under a certificate which allows it to accumulate time between overhauls (TBO) in excess of manufacturer's recommendations. The Company regularly inspects its engines. A majority of the engines used by the Company have accumulated TBO in excess of manufacturer's recommendations.
Federal Aviation Administration (FAA) Matters- Several allegations and proposed penalties have been put forth by
the FAA and are currently being reviewed by the Company. Management has assessed the probability and has estimated and accrued a reasonable amount to cover any penalties the Company may incur. None of these assertions have resulted in any enforcement action against the Company, nor does the Company expect any actions as a result of the allegations.
NOTE 13 SUBSEQUENT EVENTS
Alpine Air Express has evaluated subsequent events through the date the financial statements were issued, and concluded there were no events or transactions during this period that required recognition or disclosure in its financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
General.
Alpine Aviation Inc. operates two business segments. The operations segment provides air cargo transportation services in the United States in Montana, North Dakota, and South Dakota (69% of revenue). In addition to air cargo transportation, the Company flies charters for other cargo carriers (23% of revenue), and leases passenger aircraft to other air carriers (8% of revenue). The public services segment provides maintenance service on aircraft owned and operated by third parties (less than 1% of revenue), and operates a First Officer training program (less than 1% of revenue).
During the three months ended July 31, 2010, cargo volumes were slightly lower (1%) when compared to the same period last year. The Company carried 2,100 tons of cargo this quarter in 2010 compared to 2,130 tons in the same quarter in 2009.
In 2009 the Company was successful in its attempts to renew the Montana/South Dakota/North Dakota contract with the US Postal Service. The contract began in 2009 and runs for six years through 2015. In the future, if the Company were unable to renew this contract, it would have a significant impact on earnings and revenues. However, management has had substantial success in renewing contracts with the USPS over the past 20 years. The Company is also under contract with a major US cargo carrier until 2013.
The current US Postal Service contract includes a significant per pound rate increase over previous contracts. The Company continues to experience moderate rising costs. Fuel, insurance, aircraft maintenance, and repairs place a demand on the Companies cash resources, however, management has been exceptionally proactive in containing and reducing operating costs in order to better maximize the use of cash resources.
Liquidity and Capital Resources
July 31, 2010 and October 31, 2009.
Historical Source of Cash and Capital Expenditures:
The Company has a working capital position on July 31, 2010 of $2,205,436, as compared to working capital on October 31, 2009, of $669,987. The increase in working capital has been the direct result of a $486,939 increase in current assets coupled with a decrease of $1,048,510 in current liabilities. The Company presently has no material off-balance sheet financing arrangements.
13
Total assets increased to $27,421,164 on July 31, 2009 from $26,560,224 on October 31, 2009. Total liabilities decreased to $12,414,725 from $12,552,207 during the same period. Stockholders' equity has also increased a total of $998,422, from $6,542,737 to 7,541,159 for October 31, 2009 and July 31, 2010, respectively.
For the nine months ended July 31, 2010 the Company had a net profit from operations before income taxes and preferred stock dividends of $2,364,772. This is an increase of $1,281,797 from the previous years net income of $1,082,975. Depreciation and amortization expense for the nine months ending July 31, 2010 was $2,508,296 for an increase of $152,863 over last year.
During the nine months ended July 31, 2010, the Company decreased the tax net operating loss carryforward by $2,234,661. There was an increase in the deferred tax accounts of $909,000.
Investing activities for the nine months ended July 31, 2010, consisted mainly of the purchase of one additional aircraft, engine overhauls, and capital improvements to aircraft totaling $3,512,478. The Company also received proceeds of $1,128,800 from the sale of one Beechcraft 1900 aircraft and other equipment.
For the nine months ended July 31, 2010, net cash used in financing activities was $1,927,893, which included new funds made available from notes payable of $1,922,769. The subsequent use of these funds was primarily towards reducing notes payable by $2,519,715, payoff of a line of credit of $758,875 and the payment of preferred stock dividends of $566,339.
For the nine months ended July 31, 2009, net cash used from financing activities was $76,296, which included a new capital lease of $1,200,000, a new line of credit of $748,875 and $50,000 loan from a related party. The subsequent use of these funds was primarily used towards reducing notes payable by $1,622,114, the payment of preferred stock dividends of $270,977 and the redemption of $182,080 of Preferred Stock in the Company.
For the nine months ended July 31, 2010 and July 31, 2009, net uses in cash and cash equivalents were $481,467 and $674,294, and ending cash and cash equivalents were $711,469 and $46,500, respectively.
Cash Requirements:
The following table summarizes the Companys contractual obligations as of July 31, 2010:
|
|
| Total |
|
| One Year |
|
| 2-5 Years |
|
| After 5 Years |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt principal |
| $ | 8,120,468 |
| $ | 1,168,000 |
| $ | 5,229,863 |
| $ | 1,722,605 |
Capital leases principal |
|
| 851,351 |
|
| 232,000 |
|
| 619,351 |
|
| - |
Interest payments |
|
| 1,832,201 |
|
| 555,987 |
|
| 1,224,970 |
|
| 51,244 |
Operating leases |
|
| 350,054 |
|
| 39,342 |
|
| 92,950 |
|
| 217,762 |
Dividend payment of preferred shares |
|
| 687,428 |
|
| 485,243 |
|
| 202,185 |
|
| - |
Total |
| $ | 11,841,502 |
| $ | 2,480,572 |
| $ | 7,369,319 |
| $ | 1,991,611 |
Future Capital Expenditures:
The Company, as of July 31, 2010, had no open commitments to purchase additional aircraft.
Results of Operations.
Three months ended July 31, 2010 and 2009.
Operating Revenue
During the three months ended July 31, 2010 total operating revenues were $4,823,087, representing a less than 1% decrease over 2009 revenues for the same period of $4,823,402. The following tables summarize Alpine Airs operating revenue and associated percentage-of-change for the periods indicated.
14
|
| Three months ended July 31, 2010 |
|
| Three months ended July 31, 2009 |
| 2010 over 2009 Change |
Operating Revenue: |
|
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
|
Mail revenue | $ | 3,285,367 |
| $ | 3,134,589 |
| 5% |
Contract cargo revenue and ad-hoc charters |
| 1,171,101 |
|
| 1,384,708 |
| (15)% |
Aircraft leasing |
| 346,100 |
|
| 298,015 |
| 16% |
Total operations |
| 4,802,568 |
|
| 4,817,312 |
| Less than 1% |
Public services |
|
|
|
|
|
|
|
First officer |
| 14,779 |
|
| 2,808 |
| 426% |
Maintenance |
| 5,740 |
|
| 3,282 |
| 75% |
Total public services |
| 20,519 |
|
| 6,090 |
| 237% |
Total operating revenue | $ | 4,823,087 |
| $ | 4,823,402 |
| Less than 1% |
|
| Three months ended July 31, 2010 |
| Three months ended July 31, 2009 |
| 2010 over 2009 Change |
Operating Revenue: |
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
Mail revenue |
| 68% |
| 65% |
| 3% |
Contract cargo revenue and ad-hoc charters |
| 24% |
| 28% |
| (4)% |
Aircraft leasing |
| 7% |
| 6% |
| 1% |
Total operations |
| 99% |
| 99% |
| - |
Public services |
|
|
|
|
|
|
First officer |
| Less than 1% |
| Less than 1% |
| - |
Maintenance |
| Less than 1% |
| Less than 1% |
| - |
Total public services |
| 1% |
| 1% |
| - |
Total operating revenue |
| 100% |
| 100% |
| - |
Direct Costs
Total direct costs decreased to $3,405,734 from $3,786,225 for the three months ending July 31, 2010 and 2009, respectively. This decrease is mainly due to a decrease of $276,397 in labor and benefits expenses, a decrease of $118,743 in aircraft lease expense, and a decrease of $112,372 in aircraft insurance expense. Labor and benefits expenses decreased due to the ceasing of operations in Hawaii, aircraft lease expenses decreased due to the ending of several sale/leaseback agreements, and aircraft insurance expense decreased due to a premium decrease with a new insurance company. Depreciation and amortization expense for the three months ended July 31, 2010 increased to $784,661 from $750,885 during the same period in 2009. This increase was due to additional depreciation on one new aircraft acquired during 2010 and from major engine and airframe component overhauls capitalized in 2010. The following table summarizes Alpine Airs direct costs and the associated percentages-of-change for the periods indicated.
|
| Three months ended July 31, 2010 |
|
| Three months ended July 31, 2009 |
| 2010 over 2009 Change |
Direct Costs: |
|
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
|
Depreciation and amortization | $ | 784,661 |
| $ | 750,885 |
| 4% |
Other direct costs |
| 2,572,128 |
|
| 2,991,265 |
| (14)% |
Total operations |
| 3,356,789 |
|
| 3,742,150 |
| (10)% |
Public services |
|
|
|
|
|
|
|
Total public services |
| 48,945 |
|
| 44,075 |
| 11% |
Total direct costs | $ | 3,405,734 |
| $ | 3,786,225 |
| (10)% |
15
Operating Expenses
Operating expenses increased to $724,774 from $441,040 for the three months ended July 31, 2010 and 2009, respectively. This was due mainly to an increase in bad debt expense and the accrual of fines and penalties. The following table summarizes Alpine Airs operating expenses and the associated percentages-of-change for the periods indicated.
|
| Three months ended July 31, 2010 |
|
| Three months ended July 31, 2009 |
| 2010 over 2009 Change |
Operating Expenses: |
|
|
|
|
|
|
|
General and administrative | $ | 724,774 |
| $ | 441,040 |
| 64% |
Total operating expenses |
| 724,774 |
|
| 441,040 |
| 64% |
Interest Income
Interest income for the three months ended July 31, 2010 increased to $2,816 from the amount at July 31, 2009 of $2,395. This increase in interest income is due to an increase of cash in interest bearing accounts.
Interest Expense
Total interest expense for the three months ended July 31, 2010 and 2009 was $381,483 and $215,939, respectively. This increase in interest expense is due to a refinance of a capital lease to a note payable and subsequent pre-payment penalties associated with this early termination of the lease.
Gain on Disposal of Assets
Gain on disposal of assets for the three months ended July 31, 2010 increased to $425,044 from $0 as of July 31, 2009. The gain on disposal of assets is due to the difference in the cost basis versus the net book value on a sale of a Beechcraft 1900 aircraft.
Income Tax Expense
The provision for income tax expense for the three months ended July 31, 2010 and 2009 was $419,850 and $180,000, respectively. The increase in income taxes as a percentage of income before taxes of 56.8% in 2010 and 40.9% in 2009 was due to a non-deductible fines and penalties.
Net Income
For the three months ended July 31, 2010 and 2009, income before preferred dividends was $319,106 and $259,751, or $0.01 per share and $0.01 per share, respectively. For the same periods net income available to shareholders was $196,798 and $137,444, or $0.00 per share and $0.00 per share, respectively. The difference for both years presented is approximately $122,308 and $122,307, respectively ($0.00 and $0.00 per share, respectively), which is related to dividends declared on preferred stock.
Nine months ended July 31, 2010 and 2009.
Operating Revenue
During the nine months ended July 31, 2010 total operating revenues were $14,946,448, representing a 4% decrease over 2009 revenues for the same period of $15,511,325. This decrease in revenue is attributed to decrease in contract cargo revenue and ad-hoc charters. The following tables summarize Alpine Airs operating revenue and associated percentage-of-change for the periods indicated.
16
|
| Nine months ended July 31, 2010 |
|
| Nine months ended July 31, 2009 |
| 2010 over 2009 Change |
Operating Revenue: |
|
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
|
Mail revenue | $ | 10,253,693 |
| $ | 9,882,936 |
| 4% |
Contract cargo revenue and ad-hoc charters |
| 3,491,817 |
|
| 4,589,586 |
| (24)% |
Aircraft leasing |
| 1,159,375 |
|
| 904,511 |
| 28% |
Total operations |
| 14,904,885 |
|
| 15,377,033 |
| (3)% |
Public services |
|
|
|
|
|
|
|
First officer |
| 28,080 |
|
| 15,369 |
| 83% |
Maintenance |
| 13,483 |
|
| 118,923 |
| (89)% |
Total public services |
| 41,563 |
|
| 134,292 |
| (69)% |
Total operating revenue | $ | 14,946,448 |
| $ | 15,511,325 |
| (4)% |
|
| Nine months ended July 31, 2010 |
| Nine months ended July 31, 2009 |
| 2010 over 2009 Change |
Operating Revenue: |
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
Mail revenue |
| 68% |
| 64% |
| 4% |
Contract cargo revenue and ad-hoc charters |
| 23% |
| 29% |
| (6)% |
Aircraft leasing |
| 8% |
| 6% |
| 2% |
Total operations |
| 99% |
| 99% |
| - |
Public services |
|
|
|
|
|
|
First officer |
| Less than 1% |
| Less than 1% |
| - |
Maintenance |
| Less than 1% |
| Less than 1% |
| - |
Total public services |
| 1% |
| 1% |
| - |
Total operating revenue |
| 100% |
| 100% |
| - |
Direct Costs
Total direct costs decreased to $10,677,114 from $12,099,867 for the nine months ending July 31, 2010 and 2009, respectively. This decrease is mainly due to a decrease of $862,367 in labor and benefits expense, a decrease of $665,653 in aircraft lease expense, and a decrease of $100,073 in aircraft insurance expense. Labor and benefits expenses decreased due to the ceasing of operations in Hawaii, aircraft lease expenses decreased due to the ending of several sale/leaseback agreements, and aircraft insurance expense decreased due to a premium decrease with a new insurance company. Depreciation and amortization expense for the nine months ended July 31, 2010 increased to $2,428,769 from $2,355,433 during 2009. This increase was due to additional depreciation on one new aircraft acquired during 2010 and from major engine and airframe component overhauls capitalized in 2010. The following table summarizes Alpine Airs direct costs and the associated percentages-of-change for the periods indicated.
|
| Nine months ended July 31, 2010 |
|
| Nine months ended July 31, 2009 |
| 2010 over 2009 Change |
Direct Costs: |
|
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
|
Depreciation and amortization | $ | 2,428,769 |
| $ | 2,355,433 |
| 3% |
Other direct costs |
| 8,126,033 |
|
| 9,569,182 |
| (15)% |
Total operations |
| 10,554,802 |
|
| 11,924,615 |
| (11)% |
Public services |
|
|
|
|
|
|
|
Total public services |
| 122,312 |
|
| 175,252 |
| (30)% |
Total direct costs | $ | 10,677,114 |
| $ | 12,099,867 |
| (12)% |
17
Operating Expenses
Operating expenses decreased to $1,570,842 from $1,602,110 for the nine months ended July 31, 2010 and 2009, respectively. This decrease was due mainly to an overall reduction in labor and benefits expense and a decrease in bad debt expense, coupled with an increase in fines and penalties. The following table summarizes Alpine Airs operating expenses and the associated percentages-of-change for the periods indicated.
|
| Nine months ended July 31, 2010 |
|
| Nine months ended July 31, 2009 |
| 2010 over 2009 Change |
Operating Expenses: |
|
|
|
|
|
|
|
General and administrative | $ | 1,570,842 |
| $ | 1,602,110 |
| (2)% |
Total operating expenses |
| 1,570,842 |
|
| 1,602,110 |
| (2)% |
Interest Income
Interest income for the nine months ended July 31, 2010 decreased to $9,259 from the amount at July 31, 2009 of $10,660. This decrease in interest income is due to a reduction of cash in interest bearing accounts.
Interest Expense
Total interest expense for the nine months ended July 31, 2010 and 2009 was $766,807 and $660,690, respectively. This increase in interest expense is due to a refinance of a capital lease to a note payable and subsequent pre-payment penalties associated with this early termination of the lease.
Gain on Disposal of Assets
Gain on disposal of assets for the nine months ended July 31, 2010 increased to $423,828 from $0 as of July 31, 2009. The gain on disposal of assets is due to the sale of one Beechcraft 1900 aircraft
Income Tax Expense
The provision for income tax expense for the nine months ended July 31, 2010 and 2009 was $1,032,000 and $441,000, respectively. The increase in income taxes as a percentage of income before taxes of 43.6% in 2010 and 40.7% in 2009 was due to non-deductible fines and penalties.
Net Income
For the nine months ended July 31, 2010 and 2009, income before preferred dividends was $1,332,772 and $641,975, or $0.04 per share and $0.02 per share, respectively. For the same periods net income available to shareholders was $969,837 and $188,871, or $0.03 per share and $0.01 per share, respectively. The difference in net income available to common shareholders for both years presented is $362,935 and $453,104, respectively ($0.01 and $0.01 per share, respectively), which is related to dividends declared on preferred stock and $89,780 amortization of preferred stock discount for the nine months ended July 31, 2009.
Off-balance sheet arrangements
We have no off balance sheet arrangements during the quarter ended July 31, 2010.
Forward Looking Statements.
Statements made in this Form 10-Q which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of the Company, including, without limitation, (i) our ability to retain existing commercial relationships and to obtain additional profitable sources of revenue, and (ii) statements preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond the Company's control) that could cause actual results to differ materially from those set
18
forth in the forward-looking statements, including the following, in addition to those contained in the Company's reports on file with the SEC: general economic or industry conditions, nationally and/or in the communities in which the Company conducts business, legislation or regulatory requirements, the economic condition of the U.S. Postal Service, changes in the air cargo, charter and leasing industries, demand for air cargo, charter and leasing services, competition, changes in the quality or composition of the Company's services, our ability to develop profitable new sources of revenue, changes in accounting principals, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting the Company's operations, services and prices.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. The Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Managements report on disclosure controls and procedures.
As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our CEO and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our CEO and Principal Financial Officer concluded that information required to be disclosed is recorded, processed, summarized and reported within the specified periods and is accumulated and communicated to management, including our CEO and Principal Financial Officer, to allow for timely decisions regarding required disclosure of material information required to be included in our periodic Securities and Exchange Commission reports. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our CEO and Principal Financial Officer have concluded that our disclosure controls and procedures are effective to a reasonable assurance level of achieving such objectives. However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. In addition, we reviewed our internal controls over financial reporting, and there have been no changes in our internal controls or in other factors in the last fiscal quarter that has materially affected our internal controls over financial reporting.
Changes in internal control over financial reporting
We had no changes in our internal control over financial reporting during the quarter ended July 31, 2010.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 1A. Risk Factors
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities
During the quarter ended July 31, 2010, we did not issue any unregistered securities.
Use of Proceeds of Registered Securities
We had no proceeds from the sale of registered securities during the quarter ended July 31, 2010.
19
Purchases of Equity Securities by Us and Affiliated Purchasers
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be Purchased Under the Plans or Programs |
Month #1 May 1, 2010 through May 31, 2010 | None | None | None | None |
Month #2 June 1, 2010 through June 30, 2010 | None | None | None | None |
Month #3 July 1, 2010 through July 31, 2010 | None | None | None | None |
Total | None | None | None | None |
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. (Removed and Reserved).
Item 5. Other Information.
(a)
None; not applicable.
(b)
Nominating Committee
During the quarterly period ending July 31, 2010, there were no changes in the procedures by which security holders may recommend nominees to the Companys Board of Directors.
Item 6. Exhibits
(a) Exhibits and index of exhibits.
31.1 302 Certification of Eugene R. Mallette
31.2 302 Certification of Rick C. Wood
32 906 Certification
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALPINE AIR EXPRESS, INC.
Date: | 09/10/10 |
| By: | /s/Eugene R. Mallette |
|
|
|
| Eugene R. Mallette |
|
|
|
| Chief Executive Officer and Director |
|
|
|
|
|
Date: | 09/10/10 |
| By: | /s/Rick C. Wood |
|
|
|
| Rick C. Wood |
|
|
|
| Principal Financial Officer |
|
|
|
|
|
Date: | 09/10/10 |
| By: | /s/Max A. Hansen |
|
|
|
| Max A. Hansen |
|
|
|
| Secretary/Treasurer and Director |
|
|
|
|
|
Date: | 09/10/10 |
| By: | /s/Joseph O. Etchart |
|
|
|
| Joseph O. Etchart |
|
|
|
| Chairman |
|
|
|
|
|
Date: | 09/10/10 |
| By: | /s/Ronald L. Pattison |
|
|
|
| Ronald L. Pattison |
|
|
|
| Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21